What impact could the general election have on the housing market?

With the next UK general election set for July 4, 2024, many current and future home owners will be wondering what impact this will have on property prices should they vote Conservative under Rishi Sunak, Sir Keir Starmer’s Labor Party, Liberal Democrats led by Sir Ed Davey or Reform UK led by Nigel Farage or their local Green Party, SNP, Plaid Cymru or independent candidates.

Changes in government following a UK general election have historically affected the housing market in a variety of ways, influenced by changes in economic policy, market confidence and specific housing policy.

Here are some examples from recent decades:

1997 general election (Labour victory)

When Tony Blair’s Labor Party won a landslide victory in 1997, it had a significant impact on the housing market. The new government introduced policies aimed at stimulating economic growth and stability, which led to increased consumer confidence. The period following this election was characterized by significant home price inflation, with annual home price growth rates reaching double digits in the early 21st century. Contributing factors include low interest rates, rising incomes and strong economic performance.

2010 general election (conservative-liberal democrat coalition)

The 2010 elections led to the formation of a coalition government between the Conservative Party and the Liberal Democrats. This transition occurred during a period of economic uncertainty following the 2008 financial crisis. The coalition introduced austerity measures and introduced a policy of stabilizing the economy. Initially, home prices were relatively low due to economic conditions and limited lending. However, starting around 2013, house prices began to rise significantly, thanks in part to programs such as Help to Buy, which the coalition introduced to stimulate the housing market and help first-time buyers enter the property market.

3. General Election 2015 (Conservative majority)

David Cameron’s Conservative Party won a majority in the 2015 election. The victory brought some political stability, and the government continued its policies aimed at supporting the housing market. During this period, house prices continued to rise, particularly in London and the South East, helped by economic recovery, low interest rates and continued demand.

4. 2016 Brexit referendum and 2017 general election (conservative minority)

The 2016 Brexit referendum, although not a general election, had a profound impact on the housing market, creating uncertainty. The 2017 elections, which produced a conservative minority government, deepened this uncertainty. Although the long-term impact of Brexit on house prices is still under debate, there has been a slowdown in price growth in the immediate aftermath, particularly in London, due to concerns about the economic impact of leaving the EU.

5. General Election 2019 (Conservative majority)

Boris Johnson’s Conservative Party won a decisive victory in December 2019. This result ended the political stalemate over Brexit, leading to a “Boris bounce” in market confidence. Despite the subsequent Covid-19 pandemic, the housing market has demonstrated resilience. House prices have seen strong growth during the pandemic, partly fueled by government interventions such as the stamp duty holiday and low interest rates.

Therefore, it seems that the value of our homes after the elections may be influenced by many factors, including:

• Economic policy: Government policies on tax, spending and economic management have a direct impact on consumer confidence and disposable income, which in turn affects housing demand.
• Housing policy: Specific measures targeting the housing market, such as Help to Buy, shared ownership schemes and changes to stamp duty, can either stimulate or cool the market.
• Political stability: General elections that result in a clear and stable government often increase market confidence, while uncertainty (e.g. coalitions or hung parliaments) can dampen house price growth.
• Macroeconomic conditions: Broader economic conditions, including interest rates, employment rates and economic growth, significantly impact the housing market regardless of government changes.
• Global political and socio-economic changes: Most noticeably in the wake of the 2008 financial crisis, during the Covid-19 pandemic, and rising inflation and the cost of living crisis following the Russian invasion of Ukraine in 2022.

So what can we expect from the July 4, 2024 elections?

Based on recent election periods in 2015 and 2019, we can likely expect relatively little short-term impact on the housing market.

Indeed, in the run-up to both elections on May 7, 2015 and December 12, 2019, demand from houseseekers remained steady, and according to property website Rightmove, there was a significant increase in demand in the months following each election year up to a year (increase by 18% in June 2015 and 14% in January 2020).

Given the unprecedented social, political and economic changes we have seen since 2020, including the global pandemic, the cost of living crisis and the conflict in Ukraine and Israel, the past four years have seen significant fluctuations in both home prices and affordability pricing, although it has started to see signs of stability after the disastrous 2022 mini-budget presented by Liz Truss and Kwasi Kwarteng. Potential buyers should not be discouraged either – approximately 95% of respondents claim that the upcoming elections will not change their plans.

Signals from the previous election suggest that market conditions will be positive in the coming summer months, especially if interest rates, which are at a 16-year high, fall as expected.

The knock-on effect on mortgage rates, combined with the ongoing housing shortage in the UK, has led to projections of modest average house price growth of around 2.5% by the end of 2024, rising to 3.5% in 2025.

And in the long run? As we saw earlier, while changes in government can have an impact on the housing market, the full extent and nature of this impact depends on many factors, most notably the economic context and the specific policies implemented by the new party.